On the heels of COP29, Saint Lucia’s ambitious climate commitments are again in focus. The island has positioned itself as a regional leader in the fight against climate change, with its 2023-2030 National Energy Policy (NEP) setting an aggressive target of 50% renewable energy by 2030.
These bold aspirations come against the backdrop of a complex reality that raises questions about the gap between policy and practice.
92 per cent of Saint Lucia’s primary energy comes from petroleum products. This dependency persists despite the island nation’s considerable renewable resources – including enough solar potential to replace 41 per cent of its current fossil fuel electricity generation capacity and an estimated 680 MW of untapped geothermal power.
While the NEP provides a detailed roadmap for transforming Saint Lucia’s energy sector into a more resilient, sustainable system – building on the country’s commitments under the Paris Agreement – current policies may be working against these very goals. Existing energy subsidies and price controls, originally designed to protect consumers, may be creating invisible barriers to the very transition the government seeks to achieve.
As a small island nation, Saint Lucia sits at the frontlines of the climate crisis, making its move away from fossil fuels not just an environmental imperative but a matter of national resilience. The NEP’s focus on energy efficiency and reducing dependence on imported fossil fuels reflects this urgency as the island’s two largest consumers of fossil fuels – transportation at 54 per cent and electricity generation at 39 per cent – remain firmly anchored in traditional energy systems.
Heavy Diesel Dependence Amid Push for Renewables
Saint Lucia’s energy landscape presents a clear picture of fossil fuel dependence, with the island consuming over 20.7 million imperial gallons of diesel for electricity generation alone in 2022.
The island nation’s electricity system, operated by Saint Lucia Electricity Services Limited (LUCELEC), maintains an installed generating capacity of 88.4 MW, entirely diesel-based. This infrastructure serves a peak electricity demand of 61.8 MW, highlighting the system’s built-in redundancy for reliability.
Renewable energy adoption remains in its early stages, with utility-scale renewable capacity standing at just 3.3 MW , supplemented by 1.67 MW of distributed generation.
The cost structure of electricity in Saint Lucia is a tiered system, with domestic consumers paying between US$0.31-0.33 per kWh, while commercial rates range from US$0.35-0.36. Hotel and industrial customers face slightly higher rates of US$0.361-0.369, with streetlighting fixed at US$0.367 per kWh. The system operates with relatively efficient distribution, reporting losses of 5.74% as of 2020.
With an energy use per capita of 1,826.5 kWh (2021), Saint Lucia’s consumption patterns reflect its developing economic status. The significant annual diesel imports, valued at $66,119,532 EC in 2020, alongside gasoline sales of 13.8 million imperial gallons (2019), underscore the nation’s substantial fossil fuel dependency.
To encourage clean energy adoption, Saint Lucia has implemented several temporary incentives. Solar PV systems benefit from exemptions from import duties and Value Added Tax (VAT), while electric and hybrid vehicles face a reduced import duty of 5%.
Challenges of Transitioning Away from Fossil Fuels in a Small Island Nation
As Saint Lucia grapples with the urgent need to shift away from Fossil Fuels an uneasy balancing act is at play. While clean energy goals are in place, well-intentioned government subsidies create artificial pricing, and continue to make fossil fuels a financially viable, and thus preferable, choice for consumers.
The island’s heavy dependence on imported fossil fuels leaves the nation vulnerable to global market fluctuations and creates significant fiscal pressures on a Government attempting to cushion the blow.
One notable incident occurred in 2022. Amid a global spike in oil prices triggered by the Russian invasion of Ukraine, the Government of Saint Lucia opted to protect local consumers from the worst effects, at a considerable cost. This intervention at one point took the form of a revenue cut with the potential to cost the public purse $22 million, achieved by reducing the excise tax on fuel to zero and introducing subsidies that cost the government an estimated $1.1 million monthly to provide.
At the time, Prime Minister Philip J. Pierre lamented the budgetary consequences of such measures, warning that the revenue loss would strain already challenged government services, including healthcare, education, and social assistance. Yet, the government deemed this approach essential, as rising fuel costs threatened Saint Lucians’ livelihoods.
“We always have to balance,” said Dawn Pierre-Nathoniel, Saint Lucia’s Chief Sustainable Development Officer, explaining the complex challenge of meeting immediate consumer needs while pursuing long-term sustainability goals. “Governments will always do what they can to assist their populations… but the action that needs to be taken also has to include steps towards cleaner forms of energy,” she noted.
For Saint Lucia, however, the path to this energy transition is not straightforward. According to Pierre-Nathaniel, the geographic and economic realities of small island developing states like Saint Lucia make this balance particularly challenging. While wealthier nations were able to develop their infrastructure using fossil fuels, smaller economies like Saint Lucia face constraints, needing to juggle international pressure for sustainability with domestic financial realities.
In an ideal scenario, eliminating fossil fuel subsidies would free up funds to invest in renewable resources. The Global Green Growth Institute’s Fossil Fuel Subsidy and Taxation Reform Scenarios Modelling for Saint Lucia report presents a phased-out subsidy model that could, by 2050, save the island’s economy up to EC$3.77 billion, reduce emissions by 16.4%, and increase GDP by 1.9%. Under this model, subsidy savings would be allocated to debt reduction (40%), renewable energy development (15%), energy efficiency (15%), and low-income household support (30%).
Yet, achieving these outcomes requires a difficult transition that the island is only beginning to navigate. As Pierre-Nathoniel emphasised, fostering renewable energy alternatives and phasing out fossil fuels will take time and significant infrastructure development. “With solar, wind, and geothermal energy in Saint Lucia, as those forms of energy take root and grow… hopefully, the conversation about fossil fuel subsidies will become an easier one,” she explained.
Adding to the complexity is the need to ensure that workers in the traditional energy sector are not left behind. Pierre-Nathoniel underscored the importance of a just transition, wherein the workforce that is currently trained to support internal combustion engine vehicles and fossil fuel systems is given the skills to work with emerging clean technologies. “We can’t just say, ‘Oh, you’re moving to renewables’ and leave them behind,” she said. “A just transition requires us to take them along… to ensure jobs are created, and people can maintain and grow their employment as we shift to a sustainable model.”
While subsidies currently offer short-term relief, they delay the adoption of renewables that could provide longer-term benefits for the island.
As Pierre-Nathaniel noted, reaching these goals will not happen overnight. But the hope is that, with time and balanced policy efforts, Saint Lucia can create an energy landscape that is both sustainable and accessible for all its citizens. “It’s a balance… working towards something recognizing it will take time, but having a goal in mind and knowing where you want to go,” she said.
The Impact on Consumers and Local Markets – A Generation’s Perspective
As Saint Lucia’s temporary incentives for hybrid and electric vehicles approach their most recently extended deadline, residents like Zidane Philip, a 24-year-old preparing to purchase his first personal vehicle, are questioning the impact of the government’s current policies. Despite the island’s goal to transition away from fossil fuels, the limited reach of these incentives, which provide reduced import duties and excise taxes on greener vehicles, still leaves greener transportation out of reach for many.
Philip, like many Saint Lucians, is frustrated by the government’s short-term approach. “The policies encourage me to consider greener vehicle options,” he said. “However, with these options [electric vehicles] still being either just as expensive or more expensive than used vehicles on the island, I wouldn’t aim for them.” Though the incentives have been extended again by the Cabinet, they are set to expire at the end of the month, leaving buyers uncertain of future support for greener transportation choices.
With Saint Lucia’s gasoline prices hovering at $16.50 per imperial gallon as of October 2024, the costs of operating a traditional vehicle weigh heavily on residents’ wallets but still appear more appealing than alternatives.
“The price of gasoline makes trips to the gas station a bit more frequent than before. A vehicle that consumes little to no gas is ideal in times like this,” Philip explained.
He lamented that while Saint Lucia’s government has aimed to make sustainable options more accessible, the brief extension and limited financial relief leave him hesitant to commit to a higher-priced electric vehicle.
The government’s National Energy Policy aims to make hybrid and electric vehicles a significant part of the national fleet, with a 33 per cent penetration target by 2030. However, Philip points out that affordability is still the primary barrier. “A cheaper electric vehicle would be more appreciated over a traditional ICE (internal combustion engine), especially when their main purpose is to take me from point A to point B regularly,” he said. “With them being sold at equal or higher prices, plus extra maintenance costs for the batteries, I’m held back from looking toward them as potential options.”
Concerns about performance in Saint Lucia’s hot climate compound the economic challenges, especially as climate change brings the tropical heat to new, unprecedented levels. Philip worries about the impact on electric vehicles’ lithium-ion batteries, which perform best around 26 degrees Celsius but lose efficiency at 35 degrees. “Electric vehicles can lose performance when exposed to high temperatures, and I worry about the extra maintenance costs on top of everything else,” he said.
While the island’s policymakers have made some strides, such as building solar carports and installing charging stations, these advancements haven’t been enough to tip the scales for many buyers. The recent concession extensions follow years of efforts to incentivize sustainable transport, dating back to 2014 when Saint Lucia first introduced tax benefits for hybrid and sustainable fuel vehicles. However, the continued high costs, compounded by short-lived extensions, have left many residents sceptical about the government’s long-term commitments to this effort.
Philip represents the concerns of many young Saint Lucians, caught between their desire for affordable, reliable transport and the island’s vision for a renewable future. “Yes, I’m concerned,” Philip admitted, “in future owning a fossil-fuel-based vehicle could have implications for resale value, maintenance, and sustainability. These vehicles may be reliable for the time being, but the future of transportation seems to be pushing away from internal combustion engines.”
As November gets underway, it remains unclear whether Saint Lucia will extend these limited concessions yet again or take more meaningful action. A three-month extension does little to alleviate the financial burden for residents like Philip, who want to support the country’s sustainability goals but cannot afford the current cost of participation.
Fossil Fuel Subsidy Reform and Reallocation of Resources
The Global Green Growth Institute (GGGI) recommends that Saint Lucia begin gradually phasing out fossil fuel subsidies and removing the price caps on diesel and gasoline. This subsidy removal, which would be implemented linearly, offers the government the opportunity for a significant revenue boost by allowing it to collect the full excise tax on these fuels (GGGI, 2020).
As the GGGI notes, “Fossil fuel subsidy utilises central government resources that could be used for other sectors such as health, education, etc.”
The institute proposes a specific allocation for the freed-up resources:
- 40% for debt reduction
- 30% for compensating affected households
- 15% for energy efficiency investments
- 15% for renewable energy development
Beyond reallocating funds, the GGGI report emphasises the importance of investing in renewable energy as a mechanism for fiscal resilience. Renewable systems, such as solar or wind energy, though requiring a high initial capital investment, have no ongoing fuel costs—a significant advantage over fossil fuel-based electricity. Once installed, these renewable systems could substantially decrease electricity generation costs and insulate the economy from fuel price volatility.
The GGGI report also highlights the importance of designing compensation mechanisms for low-income households that would be most affected by subsidy reform, especially given the increase in vulnerable populations following the COVID-19 pandemic. The report calls for a detailed distribution impact analysis to ensure that vulnerable households receive adequate support, ideally through direct compensation schemes that counterbalance the effects of immediate increased energy costs.
In tandem with fossil fuel subsidy reform, Saint Lucia is also encouraged to explore the potential for electrification of its transportation sector more aggressively. The Caribbean Centre for Renewable Energy and Energy Efficiency (CCREEE) report on “The Future of E-Mobility in the Caribbean” emphasises the need for policy to address current market constraints on EV imports, which are monopolised by a few dealerships that control pricing and warranty policies. It found that Caribbean nations currently lack the market scale to negotiate favourable import terms, a factor that keeps EVs financially out of reach for many consumers (CCREEE, 2021).
One solution, the report suggests, is for Caribbean nations to band together to create a larger, more attractive market for EV imports. This regional approach could bring better consumer protections and pricing options, especially regarding warranties, which are often voided for EVs once they leave the country of manufacture. This collective strategy could ease Saint Lucia’s transition to a more electrified transport sector by improving market conditions and consumer trust in EVs (CCREEE, 2021).
Transitioning to an electric transportation sector poses unique fiscal challenges, particularly concerning lost revenue from fuel taxes, which hold significant potential.
The CCREEE report notes that “Losses or reduction in the tax revenue derived from vehicle and fuel taxes are a major concern for governments when transitioning to an electrified transportation sector.”
However, the report suggests that current analyses often fail to consider the full picture, stating that “the balance… is often only considered between foreign exchange spending on fossil fuel imports and government revenues from vehicle-related duties and taxes – without factoring in the substantial health and environmental costs of conventional vehicles to society.”
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This story was originally published by 284Media, with the support of Climate Tracker’s Fossil Fuel Reporting Fellowship.
